Quarterly Portfolio Insight Report to 30/09/12

RNS Number : 1505Q

Templeton Emerging Markets IT PLC

01 November 2012

 

Templeton Emerging Markets Investment Trust PLC

Quarterly Portfolio Insight

Three months to 30 September 2012

Summary of investment objective

TEMIT seeks long-term capital appreciation through investment in companies operating in emerging markets or whose stocks are listed on the stock markets of such countries.

Company characteristics (30/09/12)

Fund launch date                                      12/06/1989

Benchmark                                               MSCI Emerging Markets Index (in £)

Lead manager                                           Mark Mobius

Total Net Assets                                       £1.99bn

Market Capitalisation                                 £1.83bn

Gearing                                                     0%
Invested Assets                                        99.1%

Ongoing Charges Ratio(OCR) (30/09/12)  1.31%

Pricing information (30/09/12)

NAV (Cum-Income)                                  602.4p

Share Price                                               555.0p

Discount to NAV (Cum-Income)               -7.9%

Current Yield (net)                                     1.0%

 

Pricing information (12 months to 30/09/12)

Highest NAV (Cum-Income)                     676.6p

Lowest NAV (Cum-Income)                      536.5p

Highest Share Price                                  633.5p

Lowest Share Price                                  497.0p

Market Overview (All figures are based in sterling)

Emerging markets rallied in the third quarter of 2012, outperforming developed markets, as financial markets remained awash with liquidity. The US Federal Reserve's third round of quantitative easing (QE3), the European Central Bank's Outright Monetary Transactions measure and the Bank of Japan's ¥80 trillion (US$1 trillion) asset-purchase programme, along with the ratification of the eurozone's European Stability Mechanism (ESM) triggered the rally. Emerging economies such as China (US$158bn), Brazil (US$65bn) and South Korea (US$5.2bn) also announced stimulus packages. In India, the government's unexpected announcement of a series of reforms boosted investor confidence, leading India to become one of the best-performing equity markets for the quarter. The MSCI Emerging Markets Index ended the three-month period with a 4.8% return in sterling terms. European markets were among the top performers as markets such as the Czech Republic, Hungary, Poland, Turkey and Russia outperformed their peers. In Asia: India, Hong Kong, Taiwan, Thailand, Singapore and Pakistan ended the period with strong returns; while markets in Latin America lagged on concerns of slowing growth in Brazil, the region's largest economy.

Investment Outlook

We believe that it is now clear that the US Federal Reserve will continue to pump money into the economy until unemployment turns around. In addition, we have seen the European Central Bank, Bank of Japan and others pumping money into the financial system. But those billions of dollars will not all flow into the perceived "safe haven" assets such as US Treasuries and other government bonds, as seems to be generally believed. In our view, these moves are positive for emerging markets; despite the psychology of risk aversion that has seized markets since the eurozone crisis, we expect more inflows into stock markets generally, not only into emerging equity markets but even into the newer and smaller emerging frontier markets.

Economic growth is one of the key reasons why we remain positive on investment in emerging markets. While growth rates in many economies have slowed, emerging markets are generally still growing much faster than developed markets. We expect a growing middle class, coupled with higher disposable incomes and low penetration in products such as cars, computers and mobile phones to boost domestic consumption in the long term, further supporting growth. In addition, we think high foreign exchange reserves and relatively lower debt levels bode well for emerging markets, potentially allowing governments to withstand external financial shocks. In terms of valuations, emerging markets have remained relatively attractive, with a 12-month forward price to earnings (P/E) ratio of 10 times, while developed markets, as represented by the MSCI World Index, are more expensive at a P/E of 12 times.

Performance

(All figures below are total return and based in sterling).

For the three months to 30 September 2012, TEMIT's share price rose 4.1% compared to the MSCI Emerging Markets Index, which rose 4.8%¹. Please note that past performance is not a guide to future performance.

Cumulative Performance¹

30 September 2012

Past performance is not a guide to future performance.

	3 Months	6 Months	Year To Date	1 Year	3 Years	5 Years	Since Launch*
TEMIT (NAV)	4.5%	-4.4%	4.2%	10.6%	24.1%	29.7%	2,162.6%
TEMIT (Share Price)	4.1%	-4.7%	2.1%	8.8%	23.1%	36.7%	1,999.5%
MSCI Emerging Mkts Index	4.8%	-2.6%	8.1%	13.2%	17.8%	20.1%	944.8%

*The first available NAV performance was calculated from 31/07/89, share price and index performance are calculated from this date.

 

Discrete Annual Performance¹

To end of September each year

Past performance is not a guide to future performance.

	30/09/11 to  30/09/12	30/09/10 to  30/09/11	30/09/09 to  30/09/10	30/09/08 to  30/09/09	30/09/07 to  30/09/08
TEMIT (NAV)	10.6%	-17.0%	35.2%	37.5%	-24.0%
TEMIT (Share Price)	8.8%	-16.2%	35.0%	49.8%	-25.9%
MSCI Emerging Mkts Index	13.2%	-14.9%	22.4%	33.1%	-23.4%

 

Geographic Information

Split Between Markets²

30 September 2012

	TEMIT
Emerging Markets	96.9%
Frontier Markets	2.2%
Developed Markets*	0.9%
*Developed market exposure represented by Austria

Regional Weightings vs. Benchmark (%)²

30 September 2012

	TEMIT	MSCI Emerging Markets Index
Asia	66.3%	60.5%
L. America / Caribbean	16.8%	21.2%
Europe	13.7%	9.8%
Mid-East / Africa	2.3%	8.3%

10 Largest Country Weightings vs. Benchmark (%)²

30 September 2012

	TEMIT	MSCI Emerging Markets Index
Hong Kong / China	25.7%	17.4%
Brazil	14.7%	12.6%
Thailand	14.5%	2.2%
Indonesia	9.9%	2.7%
India	9.5%	7.0%
Turkey	5.8%	1.7%
South Korea	4.6%	15.6%
Russia	4.4%	6.1%
South Africa	2.2%	7.9%
Mexico	2.1%	5.0%

Largest contributors and detractors to performance³

30 June 2012 - 30 September 2012

Past performance is not a guide to future performance.

Top Country Contributors		Top Country Detractors
Country	Contribution	Country	Contribution
China	1.7%	South Africa	-0.2%
Thailand	1.6%
South Korea	0.4%
Brazil	0.4%
Turkey	0.3%

Sector Information

Sector Weightings vs. Benchmark (%)²

30 September 2012

	TEMIT	MSCI Emerging Markets Index
Financials	29.2%	25.1%
Energy	22.8%	13.1%
Consumer Discretionary	16.3%	8.0%
Materials	13.3%	12.0%
Information Technology	8.2%	13.8%
Consumer Staples	7.0%	8.5%
Industrials	2.3%	6.7%
Healthcare	0.0%	1.3%
Telecommunication Services	0.0%	8.1%
Utilities	0.0%	3.6%

Sector Overweights/Underweights vs. Benchmark (%)²

30 September 2012

	Overweight/Underweight Benchmark
Energy	9.8%
Consumer Discretionary	8.3%
Financials	4.1%
Materials	1.3%
Healthcare	-1.3%
Consumer Staples	-1.5%
Utilities	-3.6%
Industrials	-4.4%
Information Technology	-5.6%
Telecommunication Services	-8.1%

Largest contributors and detractors to performance³

30 June 2011 - 30 September 2012

Past performance is not a guide to future performance.

Top Sector Contributors		Top Sector Detractors
Sector	Contribution	Sector	Contribution
Financials	2.6%	Materials	-1.3%
Energy	1.8%	Industrials	-0.2%
Consumer Discretionary	1.6%
Information Technology	0.4%
Consumer Staples	0.2%

TEMIT Holdings

10 Largest Equity Issuers⁴

30 September 2012

Security	Sector	Country	% of Total Assets
Brilliance China Automotive Holdings Ltd.	Consumer Discretionary	Hong Kong / China	9.7
PT Astra International Tbk	Consumer Discretionary	Indonesia	4.6
Tata Consultancy Services Ltd.	Information Technology	India	4.6
Dairy Farm International Holdings Ltd.	Consumer Staples	Hong Kong / China	4.4
Banco Bradesco SA, ADR, pfd	Financials	Brazil	4.4
Siam Commercial Bank PCL, fgn.	Financials	Thailand	4.3
Itau Unibanco Holding SA, ADR	Financials	Brazil	4.1
Vale SA, ADR, pfd., A	Materials	Brazil	4.0
Akbank TAS	Financials	Turkey	3.7
PetroChina Co. Ltd., H	Energy	Hong Kong / China	3.2
TOTAL			47.0%

Largest Contributors and Detractors to Performance

Top Security Contributors⁴

30 June 2012 - 30 September 2012

Past performance is not a guide to future performance.

Security	Sector	Country	Contribution
Brilliance China Automotive Holdings Ltd.	Consumer Discretionary	Hong Kong / China	1.84%
Siam Commercial Bank PCL, fgn	Financials	India	0.63%
SK Innovation Co. Ltd	Financials	Thailand	0.57%
Petroleo Brasileiro SA	Energy	Brazil	0.38%
Itau Unibanco Holding SA	Financials	Brazil	0.37%

 

 

 

 

Top Security Detractors⁴

30 June - 30 September 2012

Past performance is not a guide to future performance.

Security	Sector	Country	Contribution
Vale SA	Materials	Brazil	-0.64%
Guangzhou Automobile Group Co Ltd	Consumer Discretionary	Hong Kong / China	-0.43%
Anglo American plc	Materials	South Africa	-0.22%
Sesa Goa Ltd	Materials	India	-0.22%
Hyundai Development Co	Industrials	South Korea	-0.16%

Portfolio Turnover Rate⁵

12 months to 30 September 2012

Portfolio Turnover Rate (annualised)

3.81%

 

Significant Security Purchases and Sales⁴ 

30 June 2012 - 30 September 2012

The Investment Manager continues to use detailed company research and local market knowledge to uncover companies that they believe are currently undervalued, but have the potential to grow in value over time.

Significant Purchases

During the quarter, TEMIT switched into the global depository shares of TMK from ordinary shares due to the narrowing discount between the two share types and the relatively low liquidity of the ordinary shares. TMK is one of the world's leading manufacturers of value-added pipe products for the oil and gas industry. Its undemanding valuations and attractive growth prospects lead us to maintain a positive view on the company.

Market Capitalisation Breakdown⁵

As at 30 September 2012

	Less than £1.5 bn	£1.5 bn to £5bn	Greater than £5bn	Cash
Market Capitalisation	6.2%	26.9%	66.1%	0.9%

 

 

Statistics

Please refer to the Glossary on page 5 for definitions of these terms.

Fundamental Portfolio Characteristics⁶

30 September 2012

Past performance is not a guide to future performance.

	Price to Earnings	Price to Book Value	Price to Cash Flow	Dividend Yield	Average Market Cap (Millions)
TEMIT (Weighted Average)	15.3x	3.3x	16.7x	2.69%	£18,544
MSCI Emerging Markets Index (Weighted Average)	18.9x	3.2x	10.4x	2.88%	£27,400

Risk Statistics⁷

30 September 2012

Past performance is not a guide to future performance.

	1 Year	3 years (annualised)
Alpha	-3.52	1.86
Beta	0.95	1.13
Annualised Downside Risk	3.82	4.24
Information Ratio (Relative)	-0.88	0.23
R2	0.91	0.90
Sharpe Ratio	-0.22	0.10
Annualised Tracking Error	5.03	6.91
Annualised Volatility	16.93	20.88
Maximum Gain	20.16	49.00
Maximum Loss	-15.97	-22.87
Negative Months	5	16
Positive Months	7	20

Investment Style

·     The Investment Manager and his group use in-depth company research to find securities in any emerging market country or industry sector, regardless of company size, that they believe are undervalued by the market, but have the potential to increase in value over time.

·     Templeton Emerging Markets Investment Trust PLC (TEMIT) is actively managed, aiming to invest in those securities that the Investment Manager believes have the best potential to grow in value over a five year period. Although performance is measured against the MSCI Emerging Markets Index for reporting purposes, there is no requirement for the Investment Manager to invest in the same companies or in the same amount as the index. TEMIT's performance or portfolio positioning may therefore be very different to the index.

·     TEMIT invests in emerging markets; these markets can experience significant and sudden changes in price and can carry a higher degree of risk than developed markets. An investment in TEMIT should be considered as long-term.

Investment Manager and Group

Mark Mobius, Ph.D., Executive Chairman, Templeton Emerging Markets Group.

The Templeton Emerging Markets Group is one of the pioneers of emerging market investing. Established in 1987, the Group has over 20 years of experience and now manages £29.8 billion in emerging markets assets for retail, institutional and professional investors across the globe (as at 30/09/12).

The Templeton Emerging Markets Group is one of the largest of its kind and has a presence in 18 offices around the world.

The Group includes 53 dedicated emerging markets portfolio managers, analysts and product specialists; senior members of the Group include Allan Lam, Tom Wu and Dennis Lim. Together on average, each of the Group's investment professionals has over 11 years of relevant industry experience, and has been with the company for over 8 years. Between them, the group speak 27 different languages and dialects (as at 30/09/12).

Investor Suitability

TEMIT may be appropriate for investors who want to invest in emerging markets and are willing to take some risk for the potential of strong capital growth over the long term.

Emerging market companies can be more volatile than developed markets and an investment in TEMIT could occasionally change in value significantly over the short-term. Shareholders in TEMIT should therefore consider it as a long-term financial commitment.

Please refer to the latest annual report for more details of the risks associated with an investment in TEMIT.

Glossary of Terms

Alpha - Alpha measures the difference between a portfolio's actual returns and its expected performance, given its level of risk (as measured by beta). A positive alpha means that the portfolio has over performed, a negative alpha means the portfolio has under performed; for example, an alpha of 1.0 means the portfolio outperformed the market 1.0%.

Beta - Beta is a measure of a portfolio's sensitivity to market movements. It measures the relationship between a portfolio's excess return over an investment in a risk-free investment such as cash and the excess return of the benchmark index. For TEMIT, this is the Investment Trusts Global Emerging Markets Universe. By definition, the beta of the benchmark (in this case, an index) is 1.00. Accordingly, a portfolio with a 1.10 beta has performed 10% better (after deducting the cash rate) than the index in up markets and 10% worse in down markets, assuming all other factors remain constant. A portfolio with a high beta will tend to move more than the benchmark, a portfolio with a low beta will tend to move less.

Contributor - The amount an individual stock, country or sector has added to the performance of the entire portfolio for a given period.

Cumulative Performance - The percentage increase or decrease of a portfolio's share price or NAV over a given time period, with net income (dividends) reinvested. The fund's performance is usually benchmarked against either a relevant index or sector.

Detractor - The amount an individual stock, country or sector has subtracted from the performance of the entire portfolio for a given period.

Discrete Annual Performance - The percentage increase or decrease of a portfolio's share price or NAV over a complete 12 month period, with net income (dividends) reinvested. The fund's performance is usually benchmarked against either a relevant index or sector.

Dividend Yield - The yield a company pays out to its shareholders in the form of dividends. It is calculated by the dividends paid per share over a year divided by the stock's price. For a vehicle like TEMIT, which invests in a number of companies, this figure represents the weighted average annual dividend paid by all of the companies in which it invests. Because of share types, fees and other considerations, the dividend yield quoted here should not be used as an indication of the income to be received from this portfolio.

Downside Risk - Downside risk is a measurement which only considers negative returns. It is calculated as a downside deviation of returns below the Risk Free Rate (this is the amount a manager could expect to receive by investing in a "risk free" asset, such as with a cash deposit).

Gearing - Gearing (sometimes described as leverage)- a term used to describe the process of borrowing money for investment purposes in the expectation that the returns on the investments purchased using the borrowings exceeds the costs of those borrowings. It illustrates the effect that current prior charges may have on the value of the shareholder funds if the total assets were to rise or fall. A figure of 115 means that the shareholder funds are 15% geared and indicates the extra amount by which the shareholder funds would rise or fall if the total assets were to rise or fall. A figure of 100 means there is no gearing.

Information Ratio - This ratio divides the annualised average return for the portfolio by the Tracking Error (Relative). The higher the ratio, the better, as it reflects the extent to which a portfolio has outperformed the benchmark.

Market Capitalisation - The total market value of a company's shares. For a vehicle like TEMIT, which invests in a number of companies, this is calculated by the share price on a certain date multiplied by the number of shares in issue.

Market Cap (average) - The weighted average of all the companies in which it invests.

Maximum Gain - The best possible investment period in the period analysed. This includes temporary down periods.

Maximum Loss - The worst possible investment period in the period analysed. This includes temporary up periods.

NAV - Net Asset Value, or the total value of the portfolio at any one time, including all shares and cash, divided by the number of shares in issue.

Ongoing Charges Ratio ("OCR")- From the year ending 31 March 2012, the Ongoing Charges Ratio ("OCR") replaces the Total Expense Ratio. Prior year numbers have not been restated as the ratios are not materially different. The OCR represents the annualised ongoing charges of the Company divided by the average daily net asset values of the Company for the year, and has been prepared in accordance with the AIC's recommended methodology.

Portfolio Turnover Rate - The frequency with which assets within a portfolio are bought and sold by the manager. Portfolio turnover is calculated by taking either the total amount of new securities purchased or the amount of securities sold - whichever is less - over a particular period, divided by the total Net Asset Value (NAV) of the portfolio. The measurement for a 12-month time period. 

Positive & Negative Periods - This shows how many positive/negative months returns that a portfolio experiences across a period.

Price to Book (P/B) - The price per share of a stock divided by its book value (i.e. net worth) per share. For a portfolio, the ratio is the weighted average price/book ratio of the stocks it holds.

Price to Cash Flow (P/CF) - Supplements price/earnings ratio as a measure of relative value; it represents a weighted average of the price/cash flow ratios for the underlying portfolio holdings.

Price to Earnings (P/E) - The share price of a stock, divided by its per-share earnings over the past year. For a portfolio, it is the weighted average P/E ratio of the stocks in the portfolio. P/E is a good indicator of market expectations about a company's prospects; the higher the P/E, the greater the expectations for a company's future growth in earnings.

R2 - R2 or R squared, is an indication of how closely aligned the portfolio and the benchmark index are. R2 ranges between 0 and 1, with 0 indicating a lot of difference and 1 indicating a perfect match. A value of 0.7 and upwards generally suggests that a portfolio's performance is very closely linked to the performance of the benchmark index.

Share Price - The cost of a unit of ownership in a company as purchased through the stock exchange.

Sharpe Ratio - Sharpe Ratio judges whether the relationship between a portfolio's risk and its return is good or bad. The underlying assumption is that a portfolio manager could invest in a riskless asset (such as cash), therefore the return of the risk free asset is deducted from the annualised average return. This net return is then divided by the total risk (annualised volatility). The higher the ratio the better the return for investors for the risk taken.

Total Net Assets - The total value of a company's shares. For a vehicle like TEMIT, which invests in a number of companies, this is calculated by the Net Asset Value (NAV) on a certain date multiplied by the number of shares in issue.

Tracking Error (Relative) - Tracking Error (Relative) measures how much the return of the portfolio deviates from the benchmark index. The lower the tracking error of the portfolio, the more it resembles the benchmark in terms of risk and return characteristics.

Trust - A Trust, or Investment Trust, is a closed ended vehicle investing in a wide variety of underlying investments. Investment Trusts are traded in exactly the same way as any other equity on the London Stock Exchange. The price at which they are traded (share price) depends on the demand for the shares in the investment trust and is often at a variance with the value of their underlying holdings (or NAV).

Volatility - This is a statistical measure of the amount of movement in the price of a share or portfolio over a given period of time. If a portfolio's share price hardly moves over time, it is said to have a low volatility. Volatility is a simple measure of the consistency of returns.

 Important Information

1.   Source for NAV Performance: Franklin Templeton Investments as at 30/09/12. NAV Performance is calculated NAV-NAV, GBP, net of fund management fees. Source for share price and index is ©Morningstar as at 30/09/12. Performance is calculated in GBP net of UK basic rate tax. Past performance is not a guide to future performance. Emerging markets can carry a higher degree of risk than developed markets.

2.   Source for the Company's "Split Between Markets", "Geographic Information" and "Sector Information": Franklin Templeton Investments as at 30/09/12. Holdings of the same issuer have been combined. Weightings as percent of total. Source for the benchmark's "Geographic Information" and "Sector Information", MSCI, as at 30/09/12. Geographic split between "Emerging Markets", "Frontier Markets" and "Other" are as per MSCI index classifications. The MSCI Index, the primary benchmark for TEMIT, is an equity index calculated by Morgan Stanley Capital International (MSCI). The index measures the total return (gross dividends are reinvested) of equity securities available to foreign (nonlocal) investors in the relevant geographic region as reflected in the name of the index or as defined by MSCI. Securities included in the index are weighted according to their Free Float adjusted market capitalisation (Price*Shares outstanding*Foreign Inclusion Factor). Percentage may not equal 100% due to rounding.

3.   Source for Country and Sector "Largest Contributors and Detractors to Performance", FactSet Research System, Inc. as at 30/09/12. Profile data is calculated as a percentage of total. Holdings of the same issuer have been combined.

4.   For the "10 Largest Equity Issuers", please note that top ten equity holdings information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. Holdings of the same issuers have been combined. The information provided is not a recommendation to purchase, sell, or hold any particular security. The securities identified do not represent TEMIT's entire holdings and in the aggregate may represent only a small percentage of such holdings. There is no assurance that securities purchased will remain in TEMIT, or that securities sold will not be repurchased. In addition, it should not be assumed that any securities mentioned were or will prove to be profitable. Stocks mentioned in this report are not a solicitation to purchase those stocks, and are for example purposes only.
The portfolio manager for TEMIT reserves the right to withhold release of information with respect to holdings that would otherwise be included in a top 10 holdings list.
"Top Security Contributors" and "Top Security Detractors" are holdings based on the last 3 months period. These securities do not represent all the securities purchased, sold or recommended, and the reader should not assume that investment in the security listed was or will be profitable. Holdings are subject to change, holdings of the same issuer have been combined. The information provided is not a recommendation to purchase, sell or hold any particular security.
Source for "Top Security Contributors" and "Top Security Detractors": FactSet Research System, Inc. three months as at 30/09/12. Profile data is calculated as a percentage of total. Holdings of the same issuer have been combined.

5.   Source for "Portfolio Turnover Rate" and "Market Capitalisation Breakdown": Franklin Templeton Investments as at 30/09/12.

6.   Source for "Fundamental Portfolio Characteristics": FactSet Research System, Inc. as at 30/09/12. The Price to Earnings, Price to Cash Flow and Price to Book Value calculations shown herein use harmonic means. Values less than 0.01 (i.e. negative value) are excluded and values in excess of 200x are capped at 200x. Yields above 100% are also excluded. For the benchmarks, no limits are applied to these ratios in keeping with the benchmark's calculation methodology. Market capitalisation statistics are indicated in the base currency for the portfolio presenter.

7.   Source for "Risk Statistics": Franklin Templeton Investments as at 30/09/12. Total return, annualised ratios (30/09/12). "Downside Risk" measure used is annualised downside deviation relative to the benchmark (MSCI Emerging Markets Index)

Copyright © 2012 Franklin Templeton Investments. All rights reserved.

© 2012 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

All MSCI data is provided "as is." The portfolio described herein is not sponsored or endorsed by MSCI. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data or the portfolio described herein. Copying or redistributing the MSCI data is strictly prohibited.

The price of shares in TEMIT and income from them can go down as well as up and you may not get back the full amount that you invested.  Past performance is not a guide to future performance. Currency fluctuations will affect the value of overseas investments. When investing in a fund denominated in a currency other than sterling, your performance may also be affected by currency fluctuations. In emerging markets, the risks can be greater than in developed markets. TEMIT primarily invests in equities, which may result in the returns being more volatile than other investments such as cash or bonds.

This document does not constitute or form part of an offer for shares or an invitation to apply for shares. An investment in TEMIT entails risks which are described in the current Annual Report document. Please consult your professional adviser before deciding to invest. Performance figures are not based on audited financial statements and, unless indicated otherwise, assume reinvestment of interest and dividends. Data from third party sources may have been used in its preparation and Franklin Templeton Investments has not independently verified, validated or audited such data. A copy of the latest annual report and semi-annual report, if published thereafter can be obtained, free of charge, from Franklin Templeton Investments, The Adelphi, 1-11 John Adam Street, London, WC2N 6HT.

References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. The performance of the index does not include the deduction of expenses and does not represent the performance of any Franklin Templeton fund. The indices include a greater number of securities than those held in the portfolio.

Due to data limitations all equity holdings are assumed to be the primary equity issue (usually the ordinary or common shares) of each security's issuing company. This methodology may cause small differences between portfolio's reported characteristics and the portfolio's actual characteristics. In practice, Franklin Templeton's portfolio managers invest in the class or type of security which they believe is most appropriate at the time of purchase. The market capitalisation figures for both the portfolio and the benchmark are at the security level, not aggregated up to the main issuer. The dividend yield quoted here should not be used as an indication of the income to be received from this portfolio.

When comparing the performance of TEMIT with the benchmark index, it is important to note that the securities in which TEMIT invests may be substantially different than those represented by the benchmark index. Furthermore, an investment in TEMIT represents an investment in a managed investment company in which certain charges and expenses, including management fees, are applicable. These charges and expenses are not applicable to indices. Lastly, please note that indices are unmanaged and are not available for direct investment. Certain data and other information shown have been supplied by outside sources. While we consider that information to be reliable, we give no assurance that such data and information is accurate or complete.

For more information, UK investors should contact: Franklin Templeton Investments, The Adelphi, 1-11 John Adam Street, London WC2N 6HT.  Telephone: [phone], Email: [e-mail]. Issued by Franklin Templeton Investment Management Limited (FTIML). FTIML is authorised and regulated by the Financial Services Authority.

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